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Bond recovery takes hold

Led by imaginative sovereign issues, Latin American bond markets made a remarkable recovery this year. Corporates are now joining the bandwagon as sovereign yields come down. Felix Salmon reports.

Latin American bond markets make
a remarkable recovery this year.
Bankers are reminded of the haydays
of '93 and '97.

WHAT A DIFFERENCE a year makes. In mid-November 2002, JPMorgan's EMBI Global was trading at a stripped spread of 774 basis points over treasuries. Brazil was at 1,737bp over, yielding more than 20% - and even that constituted a significant improvement from the low point of the electioneering season, when the markets were petrified at the prospect of Lula winning the presidential vote. One year later, the EMBI was 462bp over, with Brazil 581bp over, to yield less than 10%. The administration of president Lula has proved to be about as market-friendly as any in Latin America, and the country has come to the capital markets with half a dozen issues, totalling more than $5.8 billion. On top of that is $2 billion of issuance from state oil company Petrobrás and a slew of corporate bonds.

"This has been a fantastic year for emerging markets generally and Latin America in particular," says Carlos Mauleon, head of Latin debt capital markets and investment banking at Barclays Capital.